In 2026, Toronto homeowners choosing between building an Accessory Dwelling Unit (ADU) and adding a traditional home addition face a significant cost difference: a detached or laneway ADU typically ranges from $180,000 to $350,000+, while a standard home addition cost in Toronto averages $250 to $400 per square foot, often totaling $150,000 to $400,000+ depending on size and structural complexity. Beyond construction costs, the decision also depends on Ontario zoning regulations, City of Toronto permits, servicing requirements, rental income potential, property taxes, financing options, and long-term resale value. ADUs such as laneway houses and garden suites offer income-generating potential and strong multigenerational living flexibility, while home additions provide seamless interior expansion and higher per-square-foot resale alignment with the main dwelling.
This guide compares 2026 construction costs, approval timelines, ROI estimates, infrastructure requirements, and hidden expenses to help Toronto homeowners determine which expansion strategy delivers the best financial and lifestyle return.
What Is an ADU in Toronto?
An Accessory Dwelling Unit (ADU) — also referred to as a secondary suite, garden suite, laneway house, or backyard unit — is a self-contained dwelling unit located on the same property as a single-family home. It can be:
- A basement or internal unit
- A garage conversion
- A detached backyard garden suite
- A laneway house
These units must comply with the Ontario Building Code and local zoning bylaws, including size limits, setbacks, and fire safety provisions.
What Is a Home Addition?
A home addition involves expanding your existing structure — extending the footprint of your current house. Common forms include:
- Rear extension
- Side addition
- Second-storey addition
- Bump-out or sunroom
Unlike an ADU, a home addition doesn’t typically create a fully separate rental unit — it enlarges the main living space.
Cost Overview: ADUs vs Home Additions (Toronto 2026)
ADU Construction Costs in Toronto
Based on local cost data in 2025–2026:
- Detached ADUs: $250,000 – $400,000+ (standard builds)
- Attached ADUs: $180,000 – $300,000
- Garage Conversion ADUs: $100,000 – $200,000
- Basement/Internal ADUs: $80,000 – $180,000
Prefab suites, if available and permitted, offer similar ranges but may exclude foundation, site prep, and utility hookup costs.
Example: A 300–500 sq ft prefab or garage ADU may cost $90,000 – $150,000, not including land prep and permits.
Home Addition Costs in Toronto
Toronto home additions vary widely based on complexity:
- Basic additions: ~$350 – $450 per sq ft
- Mid-range additions: ~$450 – $600 per sq ft
- High-end or complex additions (e.g., structural work): ~$600 – $800+ per sq ft
Typical total project ranges:
- 200–300 sq ft addition: ~$90,000 – $180,000
- 400–600 sq ft addition: ~$180,000 – $360,000+
- 800–1000+ sq ft: ~$360,000 – $700,000+
Independent contractor estimates also generally show $250–$400+ per sq ft for basic and mid-range additions.
Side-by-Side Cost Comparison
| Project Type | Typical Cost Range (Toronto 2026) | Key Notes |
| Basement/Internal ADU | $80,000 – $180,000 | Uses existing structure; lowest ADU cost |
| Garage Conversion ADU | $100,000 – $200,000 | May require utility work |
| Attached ADU | $180,000 – $300,000 | Shared wall reduces some costs |
| Detached ADU | $250,000 – $400,000+ | Full new build |
| Small Home Addition (200–300 ft²) | $90,000 – $180,000 | No separate unit |
| Mid Home Addition (400–600 ft²) | $180,000 – $360,000 | Popular range |
| Large Home Addition (800+ ft²) | $360,000 – $700,000+ | Complex projects |
Hidden Costs That Often Get Overlooked
Permit Fees & Municipal Requirements
In Toronto, permits for garden suites and laneway houses are based on area and unit type. Official fee schedules show unit fees (effective 2026):
- Residential unit fee: ~$56.33 per m²
- Additional permit requirements may include zoning and development charges.
Applications for laneway and garden suites may also qualify for development charge deferrals under City programs, reducing upfront costs.
Structural Design & Engineering
Home additions — especially second-storey or complex lateral expansions — often require:
- Structural reinforcement
- Engineering reports ($2,000 – $10,000+)
- Architectural drawings (10–20% of project cost)
These costs add up quickly in Toronto.
Utility Upgrades
Detached ADUs often require:
- Separate hydro hookup and panel upgrades
- Water and sewer connections
- HVAC and separate electrical systems
It’s not uncommon for utilities to add $10,000–$40,000+ to the total budget.
Even redditor discussions emphasize how utility hookups can materially increase overall cost and long-term payback.
Return on Investment (ROI) & Financial Considerations
Rental Income Potential
Toronto’s rental market continues to be strong. A well-built ADU can generate:
- Long-term rent: $1,800 – $2,500+ per month (depending on location, size, and finishes)
This potential income can accelerate cost recovery, which often home additions cannot provide as they don’t create separate rental revenue.
Resale Value
Home additions can increase property value, but ROI varies because Toronto buyers don’t always pay full cost back in valuation.
Recent estimates indicate typical ROI for additions often falls below total cost, especially luxury or aesthetic-focused projects.
Timeline Comparison
| Project Type | Typical Timeline |
| Basement/Internal ADU | 3–6 months |
| Garage Conversion ADU | 4–8 months |
| Detached ADU / Garden Suite | 6–12 months |
| Small/Medium Home Addition | 4–8 months |
| Large or Second-Storey Addition | 8–14 months |
Permits and committee review can extend ADU or addition timelines, especially if variances are needed.
Key Decision Factors for Toronto Homeowners
Choose an ADU If:
✔ You want rental income potential
✔ You prefer independent living space
✔ Site allows separation with minimal structural change
✔ You can absorb utility and permit costs
Choose a Home Addition If:
✔ You want to expand your current living footprint
✔ You don’t need a separate income unit
✔ Foundations and structural demands are simple
✔ You want integrated space rather than separate
Municipal Trends & Uptake (Toronto Context)
An interesting trend: since Toronto’s garden suite program launch, 152 garden suite permits were applied for, but only ~27 had been constructed at one point, showing the process can be slow and costly.
Final Takeaways
- Basement/internal ADUs are often the most economical way to gain space with income potential.
- Detached ADUs or garden suites deliver unique rental ROI but at significant upfront cost.
- Home additions remain a viable way to expand living space but rarely generate rental income.
- Toronto’s cost landscape in 2026 is rising due to higher labour, materials, and permit complexity.
Understanding the true cost comparison, hidden expenses, permit requirements, and income opportunities helps you make a strategic decision — whether it’s investment income with an ADU or lifestyle enhancement with an addition.
Common Questions (FAQ)
Do I need a permit to build an ADU in Toronto?
Yes — ADUs require design drawings, zoning approvals, energy reports, and inspections through the City of Toronto.
Are ADUs subject to development charges?
Some secondary dwellings qualify for development charge deferrals under specific programs.
Will a home addition remodel increase my property tax?
Yes. Larger space or additional living area often increases assessed value and taxes.
